Correlation Between First Merchants and Old National
Can any of the company-specific risk be diversified away by investing in both First Merchants and Old National at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining First Merchants and Old National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Merchants and Old National Bancorp, you can compare the effects of market volatilities on First Merchants and Old National and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in First Merchants with a short position of Old National. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Merchants and Old National.
Diversification Opportunities for First Merchants and Old National
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Old is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding First Merchants and Old National Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old National Bancorp and First Merchants is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on First Merchants are associated (or correlated) with Old National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old National Bancorp has no effect on the direction of First Merchants i.e., First Merchants and Old National go up and down completely randomly.
Pair Corralation between First Merchants and Old National
Given the investment horizon of 90 days First Merchants is expected to generate 1.13 times less return on investment than Old National. In addition to that, First Merchants is 1.05 times more volatile than Old National Bancorp. It trades about 0.07 of its total potential returns per unit of risk. Old National Bancorp is currently generating about 0.09 per unit of volatility. If you would invest 1,317 in Old National Bancorp on September 2, 2024 and sell it today you would earn a total of 999.00 from holding Old National Bancorp or generate 75.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Merchants vs. Old National Bancorp
Performance |
| Timeline |
| First Merchants |
| Old National Bancorp |
First Merchants and Old National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Merchants and Old National
The main advantage of trading using opposite First Merchants and Old National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Merchants position performs unexpectedly, Old National can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Old National will offset losses from the drop in Old National's long position.| First Merchants vs. Home Bancorp | First Merchants vs. HomeTrust Bancshares | First Merchants vs. Great Southern Bancorp | First Merchants vs. Finward Bancorp |
| Old National vs. Independent Bank | Old National vs. First Financial Bancorp | Old National vs. Lakeland Financial | Old National vs. National Bank Holdings |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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